THE NATION

Enron's Run Tripped by Arrogance, Greed

Profile: A lack of discipline and a drive to bend rules were key factors in the meltdown.

HOUSTON — Two years ago, the executive committee of Enron Corp. convened to select a new slogan for the company. Enron was on fire, entering new markets and starting new businesses on almost a daily basis. The old slogan, "The world's leading energy company," was too limiting.

The committee's top choice for a replacement: World's coolest company.

"It's a vision of innovation; it's a vision of creativity," Enron President Jeffrey K. Skilling said at the time. To underline the point, then-Chairman Kenneth L. Lay suggested wrapping the headquarters building in a pair of giant sunglasses.

The name Enron now conjures up images of monstrous greed and massive fraud, shredded documents and empty 401(k) plans, but for quite a while it was considered one of the country's leading corporations. Analysts marveled over it, Fortune magazine voted it "most innovative" six years in a row and people were eager to work there.

It wasn't mass delusion. For much of its 16 years, Enron did indeed appear innovative, creative and cool, although the executive committee never made the new slogan official. It was the kind of place where the normal workplace rules were suspended for what seemed the best reason: to free people to achieve excellence.

Much of the transformation was the work of Skilling, who arrived at Enron in 1990 from the consulting group McKinsey & Co. and rose to become chief executive for six months before resigning last August. During Skilling's first week at Enron, his secretary brought him a stack of expense accounts to review.

"You've got to be kidding me," Skilling recalled in a 2000 interview for an academic study. "Here the world's just fallen apart around us--deregulation, new customers, new products. And I'm going to sit here line-item by line-item and go through an expense statement?"

Henceforth, he decreed, expense reports would routinely be approved without review.

As Skilling ascended, he overhauled the company culture. He set employees loose, encouraging them to push the edge of every rule, even without their supervisors' knowledge. He instituted a company-wide performance review system designed to weed out the weak. He rewarded fast results with big money. And he said that not only would Enron pattern itself after General Electric, the most sustained success in corporate America, but it would also surpass it.

In the hothouse atmosphere of the late '90s, all of these ideas seemed reasonable, even commonplace. The stock market was soaring. People confused getting rich with being smart. The dot-coms, then riding high, looked like they would kill off the stodgy old industrial companies. It seemed like the boom times would never end.

By the time they did early last year, Enron had become less a company than a collection of mercenaries, according to current and former employees. Secret partnerships were set up that critics say violated the most basic conflict-of-interest rules.

Company earnings and revenue were inflated or illusory. Hardly anything was real, unless it was the tens of millions of dollars that top executives were making from selling stock as fast as they could.

Enron was not only one of the biggest corporate collapses in American history, it was also one of the fastest; what appeared a viable if overextended company in September was bankrupt in December. Every day brings fresh allegations of chicanery and manipulation by both Enron and its auditor, Andersen. Ten congressional committees are investigating, as is the Securities and Exchange Commission and the Justice Department.

On Friday morning, former Enron Vice Chairman J. Clifford Baxter was found dead in his Mercedes-Benz. The death was ruled a suicide Saturday by the Harris County, Texas, medical examiner's office. Friends said he was despondent over having been unable to put a stop to Enron's highly questionable accounting methods.

"Enron prospered by challenging the limits of accepted behavior. The vast bulk were in ways that were socially, legally and politically acceptable," said Robert F. Bruner, a University of Virginia graduate business professor who cowrote a multimedia study of Enron that was conducted in 2000 and 2001.

"But Enron lost discipline over its aggression," Bruner said. "The biggest reason for Enron's fall is its absence of humility."

Bruner's study is the source of this story's quotes from former Enron executives Lay, Skilling and Chief Financial Officer Andrew S. Fastow, who are now declining media interviews.

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We've taken all these young bright people. We've given them a toolbox. . . . That's how we build our businesses. Just people dreaming up solutions every day.

Andrew S. Fastow, Enron chief financial officer, in April 2000

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Louise Kitchen was a young British trader spearheading Enron's entry into Europe's energy markets. She wasn't a top executive and hadn't even turned 30. But Kitchen cooked up a plan for the company's online trading operation.